Weighing the Options of Refinancing
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It has been said that only when your new interest is at least two points lower, should you refinance your mortgage. That may have been accurate a while back, but as refinancing has been costing less recently, it is never the wrong time to consider a new mortgage! Refinancing your mortgage has some benefits that often make it worth the up-front cost several times over.
Benefits from Refinancing
You could be able to bring down your interest rate (sometimes substantially) and have smaller monthly payments with your refinanced mortgage. Additionally, you might have the option of tapping into your home equity by "cashing out" some funds to remodel your home, consolidate debt, or plan a special vacation. You could be able to refinance into a shorter-term mortgage, enabling you to build up your equity quicker.
Expenses and Fees
All of these advantages do cost something, though. You will pay the same types of fees as you did with your present mortgage. Among these will be settlement costs, appraisal fees, lender's title insurance, underwriting fees, and others.
Doing the Math
You might investigate paying points to reduce your interest rate. If you pay (on average) 3% of the loan amount at the start, the savings for the term of the refinanced mortgage loan can be significant. You might be told that these points can be deducted on your income taxes, but since tax regulations can be ever-changing, we urge you to consult with your tax professional before making any decisions based on this.
One more expense that a borrower might consider is that a reduced interest rate will reduce the interest amount you will be able to deduct from your federal income taxes. We can help you do the math! Call us at (207) 571-8034.
Most people find that the monthly savings quickly balance out the initial cost of refinancing. We will help you figure out which loan program is right for you, taking into account your cash on hand, the likelihood of selling your residence in the next few years, and the effect refinancing might have on your taxes. Call us at (207) 571-8034 to get you started.
Curious about refinancing? Give us a call at (207) 571-8034.